Solutions manual for foundations of business 4th edition by pride hughes and kapoor

Solutions Manual for Foundations of Business 4th Edition by William M.Pride,
Robert J.Hughes and Jack R.Kapoor
Link full download: />
CHAPTER 2

Being Ethical and Socially Responsible
INSTRUCTOR MANUAL RESOURCES
2.1

A Word from the Authors ....................................................................................................... 39

2.2

Transition Guide ..................................................................................................................... 39

2.3

Quick Reference Guide ........................................................................................................... 41

2.4

Learning Objectives ................................................................................................................ 42

2.5

Brief Chapter Outline .............................................................................................................. 42

2.6

Comprehensive Lecture Outline ............................................................................................. 43

2.7

Textbook Answer Keys........................................................................................................... 55
2.7a

Concept Checks .................................................................................................... 55

2.7b

Discussion Questions ............................................................................................ 59

2.7c

Video Case: PortionPac Chemical Is People-Friendly, Planet-Friendly .............. 60

2.7d

Building Skills for Career Success ....................................................................... 61

2.8

Quizzes I and II ....................................................................................................................... 62

2.9

Answer Key for Quizzes I and II ........................................................................................... 65

2.10

Classroom Exercises ............................................................................................................... 65

2.10a Homework Activities ............................................................................................ 65
2.10b Classroom Activities ............................................................................................. 66
2.10c Exercise Handouts ................................................................................................ 66


Chapter 2 Being Ethical and Socially Responsible
39

38 © 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly

accessible website, in whole or in part.

2.1 A WORD FROM THE AUTHORS
The material on ethics and social responsibility is presented early in the text to underscore the
importance of business’s role in our society. In this context, we define business ethics and discuss
the major factors believed to influence the level of ethical behavior in an organization. We also
examine several types of ethical issues.
As in Chapter 1, we turn to American history to trace the evolution of socially responsible business
practices. Next, we define and contrast two contemporary views of social responsibility: the
economic model and the socioeconomic model. In the process, we present arguments both for and
against increased social responsibility in business. We consider social changes in three specific
areas: consumerism, employment practices, and the environment. We identify public and private
agencies that regulate or monitor business practices in these areas, including the Equal Employment
Opportunity Commission and the Environmental Protection Agency. Finally, we outline the steps in
the development and implementation of an effective corporate program for social responsibility.

2.2 TRANSITION GUIDE
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website, in whole or in part.

40 Chapter 2 Being Ethical and Socially Responsible

New in Chapter 2: Being Ethical and Socially Responsible
•
•
•
•

•

•

•
•
•
•

•
•
•
•
•

•

•

A new Inside Business feature describes how Chipotle has expanded beyond 1,300 restaurants
worldwide and increased annual sales above $2 billion.

The Nortel Networks Corporation example in the “Conflict of Interest” section has been deleted.
The “Individual Companies’ Role in Encouraging Ethics” section has been revised.
The “Social Responsibility” section describes how Walmart helped with the relief efforts after
Hurricane Sandy hit the East Coast. In addition to providing food and personal care products,
Walmart delivered one million bottles of water in New York City and to the state of New Jersey.
Also in the “Social Responsibility” section, the discussion of General Mills has been updated.
Since its inception in the mid-1990s, General Mills Box Tops for Education has raised more than
$400 million to provide schools with funding for whatever students need.
A new discussion has been added on how Dell Corporation partners with the University of Texas
to invite college students from around the world to join its strong community of support and to
present their innovative ideas for solving social problems.
The discussion on IBM’s World Community Grid has been revised and updated.
GE’s social responsibility activities have been updated with new examples, such as how the GE
Foundation matches GE employee and retiree gifts to disaster relief organizations.
A new ExxonMobil example explains how the company’s employees, retirees, and ExxonMobil
Foundation provided $278.4 million in cash, goods, and services around the world.
AT&T’s social responsibility activities have been updated. In 2012, AT&T developed the
“Texting and Driving: ‘It Can Wait’ ” Simulator to show the dangers of texting behind the
wheel.
Figure 2-3, “Comparative Income Levels,” has been updated to reflect the new data on the
median household incomes of Asian, white, Hispanic, and African-American workers in 2011.
Figure 2-4, “Relative Earnings of Male and Female Workers,” has been updated to reflect the
new data for 2011.
The key term National Alliance of Business and its discussion have been deleted.
A new Sustain the Planet feature explains social responsibility at Xerox for the past 40 years.
A new Entrepreneurial Success feature,“Social Entrepreneurs of Tomorrow,” describes how a
growing number of young entrepreneurs are starting businesses with the goal of using their skills
for a socially responsible purpose: to improve the quality of life for people all over the world.
The Scholfield Honda video case has been replaced with a new video case entitled “PortionPac
Chemical Is People-Friendly, Planet Friendly.” The founders were thinking “green” long before

the word came to describe an international environmental movement.
The Building Skills for Career Success section contains a new Social Media Exercise that
describes how businesses are using social networks.

© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in
whole or in part.


Chapter 2 Being Ethical and Socially Responsible
41

2.3 QUICK REFERENCE GUIDE
Instructor Resource

Location

Transition Guide

IM, pp. 39–40

Learning Objectives

Textbook, p. 32; IM, p. 42

Brief Chapter Outline

IM, pp. 42–43

Comprehensive Lecture Outline

IM, pp. 43–54

At Issue: How should employers deal with
proselytizing?

IM, p. 53

Sustain the Planet Social Responsibility at
Xerox

Textbook, p. 55

Entrepreneurial Success Social Entrepreneurs
of
Tomorrow

Textbook, p. 57

Inside Business Chipotle Mexican Grill’s “Food
with Integrity”

Textbook, p. 33

Marginal Key Terms List

Textbook, p. 60

Concept Checks

Textbook, pp. 36, 38, 44, 46, 48, 50, 53, 57, and 59

Questions and Suggested Answers, IM, pp. 55–59

Discussion Questions

Textbook, p. 60
Questions and Suggested Answers, IM, pp. 59–60

Video Case (PortionPac Chemical Is PeopleFriendly,
Planet-Friendly) and Questions

Textbook, pp. 62–63
Questions and Suggested Answers, IM, pp. 60–61

Building Skills for Career Success

Textbook, p. 63
Suggested Answers, IM, p. 61

IM Quiz I & Quiz II

IM, pp. 62–64
Answers, IM, p. 65

Classroom Exercises

IM, pp. 65–66

2.4 LEARNING OBJECTIVES
After studying this chapter, students should be able to:
1.

Understand what is meant by business ethics.

2.

Identify the types of ethical concerns that arise in the business world.

3.

Discuss the factors that affect the level of ethical behavior in organizations.

4.

Explain how ethical decision making can be encouraged.

5.

Describe how our current views on the social responsibility of business have evolved.

6.

Explain the two views on the social responsibility of business and understand the arguments for
and against increased social responsibility.

7.

Discuss the factors that led to the consumer movement and list some of its results.

8.

Analyze how present employment practices are being used to counteract past abuses.
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website, in whole or in part.


42 Chapter 2 Being Ethical and Socially Responsible

9.

Describe the major types of pollution, their causes, and their cures.

10. Identify the steps a business must take to implement a program of social responsibility.

2.5 BRIEF CHAPTER OUTLINE
I.

Business Ethics Defined

II.

Ethical Issues
A. Fairness and Honesty
B. Organizational Relationships
C. Conflict of Interest
D. Communications

III.

Factors Affecting Ethical Behavior
A. Individual Factors Affecting Ethics

B. Social Factors Affecting Ethics
C. “Opportunity” as a Factor Affecting Ethics

IV.

Encouraging Ethical Behavior
A. Government’s Role in Encouraging Ethics
B. Trade Associations’ Role in Encouraging Ethics
C. Individual Companies’ Role in Encouraging Ethics

V.

Social Responsibility

VI.

The Evolution of Social Responsibility in Business A. Historical Evolution of Business
Social Responsibility

VII.

Two Views of Social Responsibility
A. The Economic Model
B. The Socioeconomic Model
C. The Pros and Cons of Social Responsibility
1.
Arguments for Increased Social Responsibility
2.
Arguments Against Increased Social Responsibility

VIII. Consumerism
A. The Six Basic Rights of Consumers
1.
The Right to Safety
2.
The Right to Be Informed
3.
The Right to Choose
4.
The Right to Be Heard
5.
Additional Consumer Rights B. Major Consumerism Forces
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in
whole or in part.


Chapter 2 Being Ethical and Socially Responsible
43

IX.

Employment Practices A. Affirmative Action Programs
B. Training Programs for the Hard-Core Unemployed

X.

Concern for the Environment A. Effects of Environmental Legislation
1. Water Pollution
2. Air Pollution
3. Land Pollution

4. Noise Pollution
B. Who Should Pay for a Clean Environment?

XI.

Implementing a Program of Social Responsibility
A. Developing a Program of Social Responsibility
1.
Commitment of Top Executives
2.
Planning
3.
Appointment of a Director
4.
The Social Audit
B. Funding the Program

2.6 COMPREHENSIVE LECTURE OUTLINE
Most managers today are finding ways of balancing a growing agenda of socially responsible
activities with the drive to generate profits.
I.

BUSINESS ETHICS DEFINED. Ethics is the study of right and wrong and of the morality
of choices individuals make. Business ethics is the application of moral standards to business
situations.

Teaching Tip: Ask students how they decide what is right and what is wrong. Is there an internal
mechanism or process they use or a code? Follow up by asking where they learned their personal
code.

II.

ETHICAL ISSUES. Businesspeople face ethical issues every day, and some of these issues
can be difficult to assess. These issues arise out of a business’s relationship with investors,
customers, employees, creditors, and competitors.
A. Fairness and Honesty. Fairness and honesty in business are important ethical concerns.
Businesspeople must obey all laws and regulations as well as refrain from knowingly
deceiving, misrepresenting, or intimidating others.
B. Organizational Relationships. It may be tempting to place personal welfare above the
welfare of others or of the organization. Relationships with customers and co-workers
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website, in whole or in part.


44 Chapter 2 Being Ethical and Socially Responsible

C.
D.

III.

often create ethical problems such as taking credit for others’ ideas or work, not meeting
one’s commitments, and pressuring others to behave unethically.
Conflict of Interest. Conflict of interest results when a businessperson takes advantage
of a situation for his or her own personal interest rather than for the employer’s interest.
Communications. Business communications, especially advertising, can present ethical
questions. Advertisers must take precautions to guard against deception.

FACTORS AFFECTING ETHICAL BEHAVIOR. The factors that affect the level of ethical behavior in organizations are individual, social, and opportunity. (See Figure 2-1.)
A. Individual Factors Affecting Ethics

1. Individual Knowledge of an Issue. A decision maker with a greater amount of
knowledge regarding a situation may take steps to avoid ethical problems, whereas
a less-informed person may take action unknowingly that leads to an ethical
quagmire.
2. Personal Values. An individual’s moral values and central, value-related attitudes
also clearly influence his or her business behavior.
3. Personal Goals. The types of personal goals an individual aspires to and the
manner in which these goals are pursued have a significant impact on that
individual’s behavior in an organization.
B. Social Factors Affecting Ethics
1. Cultural Norms. A person’s behavior in the workplace, to some degree, is
determined by cultural norms, and these social factors vary from one culture to
another.
2. Co-workers. The actions and decisions of co-workers constitute another social
factor believed to shape a person’s sense of business ethics.
3. Significant Others. The moral values and attitudes of “significant others”—
spouses, friends, and relatives—can also affect an employee’s perception of what
is ethical and unethical behavior in the workplace.
4. Use of the Internet. Even the Internet presents new challenges for firms whose
employees enjoy easy access to sites through convenient high-speed connections at
work. An employee’s behavior online can be viewed as offensive to co-workers
and possibly lead to lawsuits against the firm if employees engage in unethical
behavior on controversial websites not related to their job.

Teaching Tip: A classroom can be considered a workplace for the time students are there. Ask
students to take a minute and write down three examples of ethical behavior in the classroom and
three examples of unethical behavior. Beyond the obvious cheating issues, students may mention
things such as one student constantly monopolizing the instructor’s time, etc.

C.

“Opportunity” as a Factor Affecting Ethics

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whole or in part.


Chapter 2 Being Ethical and Socially Responsible
45

1.

2.
3.

IV.

Presence of Opportunity. Opportunity refers to the amount of freedom an
organization gives an employee to behave unethically if he or she makes that
choice.
Ethical Codes. The existence of an ethical code and the importance management
places on this code are other determinants of opportunity.
Enforcement. The degree of enforcement of company policies, procedures, and
ethical codes is a major force affecting opportunity.

ENCOURAGING ETHICAL BEHAVIOR. Most authorities agree that there is room for
improvement in business ethics. A more problematic issue is whether business can be made
more ethical in the real world.
A. Government’s Role in Encouraging Ethics. The government can establish acceptable
levels of behavior by passing more stringent regulations. For example, the SarbanesOxley Act of 2002 gives those who report corporate misconduct sweeping new legal

protection.
B. Trade Associations’ Role in Encouraging Ethics. Trade associations can, and often
do, provide ethical guidelines for their members to follow.
C. Individual Companies’ Role in Encouraging Ethics
1. Codes of ethics that companies provide to their employees are perhaps the most
effective way to encourage ethical behavior. A code of ethics is a written guide to
acceptable and ethical behavior as defined by an organization that outlines uniform
policies, standards, and punishments for violations.
2. However, codes cannot possibly cover every situation.
a) Companies must also create an environment in which employees recognize
the importance of following the written code.
b) Managers must provide direction by fostering communication, actively
encouraging ethical decision making, and training employees to make ethical
decisions.
c) Assigning an ethics officer who coordinates ethical conduct gives employees
someone to go to if they aren’t sure of the right thing to do.
d) An ethics officer meets with employees and top management to provide
ethical advice, establishes and maintains an anonymous confidential service to
answer questions about ethical issues, and takes action on ethics code
violations.
3. See Figure 2-2 for Texas Instruments’ code of ethics.
4. Unethical practices often become ingrained in an organization.
5. Employees with high personal ethics may take a controversial step called
whistleblowing—informing the press or government officials about unethical
practices within one’s organization.
a) Whistle-blowing can have serious repercussions for an employee.

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website, in whole or in part.

46 Chapter 2 Being Ethical and Socially Responsible

b)

6.
7.
8.
V.

The Sarbanes-Oxley Act of 2002 protects whistle-blowers who report
corporate misconduct. Any executive who retaliates against a whistle-blower
can be held criminally liable and imprisoned for up to ten years.
c) The Whistleblower Protection Act of 1989 protects federal employees who
report an agency’s misconduct.
When firms set up anonymous ethical hotlines to handle ethically questionable
situations, employees may be more likely to engage in whistle-blowing.
When firms create an environment that educates employees and nurtures ethical
behavior, whistle-blowing is greatly reduced because fewer ethical problems arise.
See Table 2-1 for general guidelines for making ethical decisions.

SOCIAL RESPONSIBILITY
A. Social responsibility is the recognition that business activities have an impact on society
and the consideration of that impact in business decision making.
1. Social responsibility can cost companies a considerable amount of money, but it is
also good business.
B. Examples of Socially Responsible Organizations
1. Through Young Eagles, underwritten by S. C. Johnson, Phillips Petroleum,
Lockheed Martin, Jaguar, and other corporations, 22,000 volunteer pilots take a
half million youngsters on free flights to teach flying basics.

2. The General Mills Foundation, created in 1954, is one of the largest U.S.
companysponsored foundations and has awarded over $1 billion to communities
since its creation. General Mills Box Tops for Education has raised more than $400
million providing schools with funds to meet students’ needs.
3. Dell’s outreach programs include projects that bring technology to underserved
communities around the world. Globally, the Michael and Susan Dell Foundation
has contributed more than $850 million to improve student performance and
increase access to education.
4. Improving public schools around the world continues to be IBM’s top social
priority. Its efforts are focused on preparing the next generation of leaders and
workers. IBM launched the World Community Grid in 2004. It combines excess
processing power from thousands of computers in a virtual supercomputer that
enables researchers to gather and analyze unprecedented quantities of data aimed at
advancing research on genomics, diseases, and natural disasters.
5. General Electric Company (GE) has a long history of supporting the communities
where its employees work and live through its unique combination of resources,
equipment, and employee and retiree volunteers. The company devotes its efforts
in philanthropy to making communities around the world stronger. For example,
the GE Foundation matches GE employee and retiree gifts to disaster relief
organizations. Recently, GE employees and retirees contributed 1.3 million hours
through company-sponsored programs.

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whole or in part.


Chapter 2 Being Ethical and Socially Responsible
47

6.

With the help of dedicated Schwab volunteers, the Charles Schwab Foundation
provides programs and funding to help adults and children learn the basics of
financial literacy. Since 1993, the Schwab Foundation has distributed an average of
$4 million a year to 2,300 nonprofit organizations.
7. ExxonMobil’s commitment to education spans all levels of achievement. Recently,
ExxonMobil Corporation, its employees, retirees, and the ExxonMobil Foundation
provided $278.4 million in cash, goods, and services around the world. In addition,
the company celebrated 2011 International Women’s Day by granting $6 million to
support economic opportunities for women around the world.
8. AT&T has built a tradition of supporting education, health and human services, the
environment, public policy, and the arts in the communities it serves. Since 1984,
AT&T has invested more than $900 million in support of education. In 2012,
AT&T developed the “Texting and Driving: ‘It Can Wait’ ” Simulator to illustrate
the dangers of texting behind the wheel.
9. At Merck & Co., Inc., the Patient Assistance Program makes the company’s
medicines available to low-income Americans and their families at no cost. For
over 50 years, Merck has provided its medicines completely free of charge to
people in need through this program.
These are just a few illustrations from a long list of companies big and small that
attempt to behave in socially responsible ways.

VI.

THE EVOLUTION OF SOCIAL RESPONSIBILITY IN BUSINESS
A. Historical Evolution of Business Social Responsibility. During the first quarter of the
twentieth century, businesses were free to operate pretty much as they chose.
1. Working conditions were often deplorable by today’s standards.
a) The average workweek exceeded 60 hours in most industries.
b) There was no minimum-wage law.

c) There were no employee benefits.
d) Work areas were crowded and unsafe, and industrial accidents were the rule
rather than the exception.
2. During this period, consumers were generally subject to the doctrine of caveat
emptor, a Latin phrase meaning “let the buyer beware.”
a) Victims of unscrupulous business practices could take legal action, but going
to court was very expensive and consumers rarely won their cases.
b) There were no consumer groups or government agencies to hold sellers
responsible for their activities.
3. Prior to the 1930s, government became involved in day-to-day business activities
only when there was an obvious abuse of the free-market system and competition
was endangered. (See Table 2-2 for a list of early government regulations affecting
business.)
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website, in whole or in part.


48 Chapter 2 Being Ethical and Socially Responsible

B.

VII.

The collapse of the stock market on October 29, 1929, triggered the Great Depression
and years of economic problems for the United States.
1. Public pressure mounted for government to “do something” about the economy
and about worsening social conditions.
2. As a result, laws were passed to correct what many viewed as monopolistic abuses
of big business, and various social services were provided for individuals.

TWO VIEWS OF SOCIAL RESPONSIBILITY. Government regulation and public
awareness are external forces that have increased the social responsibility of business. But
business decisions are made within the firm—and there, social responsibility begins with the
attitude of management. There are two models of social responsibility.
A. The Economic Model. The economic model of social responsibility holds that society
will benefit most when business is left alone to produce and market profitable products
that society needs.
B. The Socioeconomic Model. The socioeconomic model of social responsibility holds
that business should emphasize not only profits but also the impact of its decisions on
society.
C. The Pros and Cons of Social Responsibility. The merits of the economic and
socioeconomic models have been debated for years. Each side seems to have four
arguments.
1. Arguments for Increased Social Responsibility. Proponents of the
socioeconomic model offer the following arguments:
a) Business cannot ignore social issues because business is a part of our society.
b) Business has the technical, financial, and managerial resources needed to
tackle today’s complex social issues.
c) By helping to resolve social issues, business can create a more stable
environment for long-term profitability.
d) Socially responsible decision making by business firms can prevent increased
government intervention, which would force businesses to do what they fail to
do voluntarily.
2. Arguments Against Increased Social Responsibility. Opponents of the
socioeconomic model offer these arguments:
a) Business managers are responsible primarily to stockholders, so management
must be concerned with providing a return on owners’ investments.
b) Corporate time, money, and talent should be used to maximize profits, not to
solve society’s problems.
c) Social problems affect society in general, so individual businesses should not

be expected to solve these problems.
d) Social issues are the responsibility of government officials who are elected for
that purpose and who are accountable to the voters for their decisions.
3. Table 2-3 compares the economic and socioeconomic viewpoints in terms of
business emphasis.

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whole or in part.


Chapter 2 Being Ethical and Socially Responsible
49

4.

Today, few firms are either purely economic or purely socioeconomic in outlook;
most have chosen some middle ground between the two.
a) However, our society generally seems to want—and even to expect—some
degree of social responsibility from business.
b) Thus, within this middle ground between the two extremes, businesses are
leaning toward the socioeconomic view.

VIII. CONSUMERISM. Consumerism consists of all those activities that are undertaken to
protect the rights of consumers. The consumer movement issues fall into three categories:
environmental protection, product performance and safety, and information disclosure.
A. The Six Basic Rights of Consumers. During the 1960s, President John F. Kennedy
declared that the consumer was entitled to a new “bill of rights.”
1. The Right to Safety. The right to safety specifies that products purchased by
consumers must be safe for their intended use, include thorough and explicit
directions for proper use, and be tested by the manufacturer to ensure product

quality and reliability. American business firms must be concerned about product
safety for several reasons.
a) Federal agencies have the power to force businesses that make or sell
defective products to take corrective actions.
b) Consumers and the government have been winning an increasing number of
product-liability lawsuits against sellers of defective products.
c) The consumer is demanding safe products.
2. The Right to Be Informed. The right to be informed means that consumers must
have access to complete information about a product before they buy it. In
addition, manufacturers must inform consumers about the potential dangers of
using their products.
3. The Right to Choose. The right to choose means that consumers have a choice of
products, offered by different manufacturers and sellers, to satisfy a particular
need.
a) The government has encouraged competition through antitrust legislation.
b) Competition and the resulting freedom of choice provide an additional benefit
for consumers by reducing prices.
4. The Right to Be Heard. The right to be heard means that someone will listen and
take appropriate action when customers complain.
a) Today, businesses are listening more attentively, and many larger firms have
consumer relations departments that can easily be contacted via toll-free
phone numbers.
b) Most large cities and some states have consumer affairs offices to act on
citizens’ complaints.
5. Additional Consumer Rights. In 1975, President Ford added the right to
consumer education which entitles people to be fully informed about their rights as
consumers. In 1994, President Clinton added the sixth right—the right to service,
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website, in whole or in part.

50 Chapter 2 Being Ethical and Socially Responsible

which entitles consumers to convenience, courtesy, and responsiveness from
manufacturers and suppliers.
Teaching Tip: Go to the Federal Trade Commission’s site and view the rights provided to
consumers ( Students may want to know about these rights.

B.

IX.

Major Consumerism Forces. Major advances in consumerism have come through
federal legislation. Major federal laws that have been passed since 1960 to protect
consumer rights are listed and described in Table 2-4.
Most recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010 was passed by Congress to protect consumers and investors.

EMPLOYMENT PRACTICES. Everyone who works for a living should have the opportunity to land a job for which he or she is qualified and to be rewarded on the basis of ability
and performance. Although this is an important issue for society, over the years this
opportunity has been denied to members of various minority groups.
1. A minority is a racial, religious, political, national, or other group regarded as
different from the larger group of which it is a part and that is often singled out for
unfavorable treatment.
2. The federal government responded to the outcry of minority groups during the
1960s and 1970s by passing a number of laws forbidding discrimination in the
workplace.
a) Now, almost 50 years after passage of the Civil Rights Act of 1964, abuses
still exist.
b) There is a disparity among income levels for whites, blacks, and Hispanics.

(See Figure 2-3.)
c) Lower incomes and higher unemployment rates also affect Native Americans,
handicapped persons, and women.
3. Responsible managers have instituted several programs to counteract the results of
discrimination.
A. Affirmative Action Programs. An affirmative action program is a plan designed to
increase the number of minority employees at all levels within an organization.
1. Employers with federal contracts of more than $50,000 per year must have written
affirmative action plans. The objective of such programs is to ensure that
minorities are represented within the organization in approximately the same
proportion as in the surrounding community.
2. Affirmative action programs have been plagued by two problems.
a) The first problem involves quotas. In the beginning, many firms pledged to
recruit and hire a certain number of minority members by a specific date. To
achieve this goal, they were forced to consider only minority applicants for
job openings.

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whole or in part.


Chapter 2 Being Ethical and Socially Responsible
51

b)

B.

The second problem is that not all businesspeople are in favor of affirmative
action programs, although most such programs have been reasonably

successful.
3. Congress created (and later strengthened) the Equal Employment Opportunity
Commission (EEOC), a government agency with the power to investigate
complaints of employment discrimination and sue firms that practice it.
4. The threat of legal action has persuaded some corporations to amend their hiring
and promotional practices, but the discrepancy between men’s and women’s
salaries still exists. (See Figure 2-4.)
Training Programs for the Hard-Core Unemployed. Some firms have assumed the
task of helping the hard-core unemployed: workers with little education or vocational
training and a long history of unemployment. Such workers require training; this
training can be expensive and time consuming.

X.

CONCERN FOR THE ENVIRONMENT. Pollution is the contamination of water, air, or
land through the actions of people in an industrialized society.
1. For several decades, environmentalists have been warning us about the dangers of
industrial pollution.
2. Unfortunately, business and government leaders either ignored the problem or weren’t
concerned about it until pollution became a threat to life and health in America.
3. Today, Americans expect business and government leaders to take swift action to clean up
our environment—and to keep it clean.
A. Effects of Environmental Legislation. As in other areas of concern to our society, legislation
and regulations play a crucial role in pollution control. The Environmental Protection Agency
(EPA) is the federal agency charged with enforcing laws designed to protect the environment.
(See Table 2-5.)
Some business owners and managers take the position that environmental standards are too
strict. Consequently, it has often been necessary for the EPA to take legal action to force firms
to install antipollution equipment and clean up waste storage areas. Experience has shown that
the combination of environmental legislation, voluntary compliance, and EPA action can

succeed in cleaning up the environment and keeping it clean.
1. Water Pollution. The Clean Water Act has been credited with greatly improving the
condition of waters in the United States. However, the task of water cleanup has proved to
be extremely complicated and costly due to pollution runoff and toxic contamination.
Improved water quality is not only necessary, but it is also achievable. Today, acid rain,
which results from sulfur emitted by smokestacks in industrialized areas, is destroying
many lakes and reservoirs.
2. Air Pollution. Aviation emissions are a potentially significant and growing percentage of
greenhouse gases that contribute to global warming. Air pollution control efforts are
encouraging. The EPA estimates that the Clean Air Act eventually will result in the
removal of 56 billion pounds of pollution from the air each year, thus measurably reducing
lung disease, cancer, and other serious health problems.
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52 Chapter 2 Being Ethical and Socially Responsible

3.

4.

Land Pollution. Today, land pollution is a serious problem.
a) The fundamental issues are basically twofold.
(1) The first issue is how to restore damaged or contaminated land at a reasonable
cost.
(2) The second issue is how to protect unpolluted land from future damage.
b) The land pollution problem has been worsening over the past few years because
modern technology has continued to produce more and more chemical and
radioactive wastes.

c) To help pay for the enormous costs of cleaning up land polluted with chemicals,
Congress created a $1.6 billion Superfund in 1980.
Noise Pollution. The Noise Control Act of 1972 established noise emission standards for
aircraft and airports, railroads, and interstate motor carriers. Noise levels can be reduced
by two methods.
a) The source of noise pollution can be isolated as much as possible, and engineers can
modify machinery and equipment to reduce noise levels.

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Chapter 2 Being Ethical and Socially Responsible
53

At Issue
The United States has been at the forefront in negotiating opportunities and expanding rights for
minorities. Recently, much attention has been given to the rights of religious minorities.
Employers must permit employees to engage in religious expression, “unless the religious
expression would impose an undue hardship on the employer.” They are also required to provide
a workplace in which religious harassment of employees is not allowed. Undue hardship can be
claimed if the accommodation interferes with legitimate business interests. According to the
EEOC:
“An employer can show undue hardship if accommodating an employee’s religious practices
requires more than ordinary administrative costs, diminishes efficiency in other jobs, infringes
on other employees’ job rights or benefits, impairs workplace safety, causes co-workers to carry
the accommodated employee’s share of potentially hazardous or burdensome work, or if the
proposed accommodation conflicts with another law or regulation.”
Workplace proselytizing presents a special challenge to employers: failure to respond to
employees’ complaints about proselytizing could lead to charges of religious harassment, but

requiring a religious employee to cease proselytizing may result in liability for failure to
reasonably accommodate the employee’s beliefs.
How should employers deal with proselytizing?

1.

For Proselytizing
Against Proselytizing
Existing laws require “reasonable ac- 1.
Existing law allows for undue hardship
commodation.” The proselytizing emfor the employer in terms of increased
ployees could be separated from em- administrative costs, infringement of
ployees who feel harassed by the
other employee rights, and diminished practice.
efficiency.

2.

Employees have certain rights to ex- 2.
Title VII of the Civil Rights Act does
press their religious views in the
not permit employees’ religious exworkplace,
such as the wearing of
pression that could reasonably be peryarmulkes or the
display of a cross in ceived by patrons of the business as an a private office.
expression of the employer’s views.

3.

If proselytizing is kept to a mini3.

Title VII permits restriction of mum
and has no impact on coreligious expression that disrupts operworkers, it could
be considered “rea- ations or is hostile or demeaning to sonable accommodation.”
customers or co-workers.
b)

B.

If it is impossible to reduce industrial noise to acceptable levels, workers should be
required to wear earplugs to guard against permanent hearing damage.
Who Should Pay for a Clean Environment? Government and business are spending billions
of dollars annually to reduce pollution.
1. Current estimates of the annual costs of improving the environment are $45 billion
to control air pollution, $33 billion to control water pollution, and $12 billion to
treat hazardous wastes.
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54 Chapter 2 Being Ethical and Socially Responsible

2.
3.

Much of the money required to purify the environment is supposed to come from
already depressed industries.
The big question is: “Who will pay for the environmental cleanup?”
a) Business leaders believe tax money should be used to clean up the
environment.
b) Environmentalists believe that the cost of proper treatment and disposal of

industrial wastes is an expense of doing business and therefore the
responsibility of the manufacturer.
c) In either case, consumers will probably pay a large part of the cost either in
the form of taxes or through higher prices.

Teaching Tip: Bring in three to five products from home. Write down the approximate prices. Tell
students how much each cost, and then ask how much more they would be willing to pay in order for
these products to be “environmentally friendly.” Products might include an apple or other fruit that
was grown with pesticides, a package of non-biodegradable garbage bags, and so forth.

XI. IMPLEMENTING A PROGRAM OF SOCIAL RESPONSIBILITY. A firm’s decision
to be socially responsible is a step in the right direction—but only a first step. The firm must
then develop and implement a tangible program to reach this goal.
A. Developing a Program of Social Responsibility. The following steps are required to
implement a social responsibility program.
1. Commitment of Top Executives. Without the support of top executives, any
program will soon falter and become ineffective.
2. Planning. A committee of managers should be appointed to plan the program.
3. Appointment of a Director. A top-level executive should be chosen to direct the
organization’s activities in implementing the plan.
4. The Social Audit. The director of the program should prepare a social audit for the
firm at specified intervals. A social audit is a comprehensive report of what an
organization has done, and is doing, with regard to social issues that affect it.
B. Funding the Program. Like any other program, a program to improve social
responsibility must be funded. Funding can come from three sources.
1. Management can pass the cost on to consumers in the form of higher prices.
2. The corporation may be forced to absorb the cost of the program if, for example,
the competitive situation does not permit a price increase.
3. The federal government may pay for all or part of the cost through special tax re
ductions or other incentives.

2.7 TEXTBOOK ANSWER KEYS
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Chapter 2 Being Ethical and Socially Responsible
55

2.7a Concept Checks
Concept Check (p. 36)
1. What is meant by business ethics?
Business ethics is the application of moral standards to business situations.
2. What are the different types of ethical concerns that may arise in the business world?
Ethical issues arise over fairness and honesty, organizational relationships, conflicts of interest,
and communications.
3. Explain and give an example of how advertising can present ethical questions.
False and misleading advertising is illegal and unethical, and it can infuriate customers.
Sponsors of advertisements aimed at children must be especially careful to avoid misleading
messages. Advertisers of health-related products also must take precautions to guard against
deception when using such descriptive terms as low fat, fat free, and light.
Concept Check (p. 38)
1. Describe several individual factors that influence the level of ethical behavior in an
organization.
Individual knowledge of an issue, personal values, and personal goals.
2. Explain several social factors that affect ethics in an organization.
Cultural norms, co-workers, significant others, and use of the Internet. These issues sometimes
arise out of a business’s relationship with investors, customers, employees, creditors, or
competitors.
3. How does “opportunity” influence the level of ethical behavior in the workplace?

Opportunity refers to the amount of freedom an organization gives an employee to behave
unethically if he or she makes that choice. In some organizations, certain company policies and
procedures reduce the opportunity to be unethical.
Concept Check (p. 44)
1. How can the government encourage the ethical behavior of organizations?
The government can encourage ethical behavior by legislating more stringent regulations. For
example, the landmark Sarbanes-Oxley Act of 2002 provides sweeping new legal protection for
those who report corporate misconduct.
2. What is trade associations’ role in encouraging ethics?
Trade associations can and often do provide ethical guidelines for their members. These
organizations, which operate within particular industries, are in an excellent position to exert
pressure on members who stoop to questionable business practices.
3. What is whistle-blowing? Who protects the whistle-blowers?
Whistle-blowing is informing the press or government officials about unethical practices within
one’s organization. The Sarbanes-Oxley Act of 2002 protects whistle-blowers who report
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56 Chapter 2 Being Ethical and Socially Responsible

corporate misconduct. Any executive who retaliates against a whistle-blower can be held
criminally liable and imprisoned for up to ten years.
4. What is social responsibility? How can business be socially responsible?
Social responsibility is the recognition that business activities have an impact on society and the
consideration of that impact in business decision making. The text provides several examples of
ways in which businesses are being socially responsible. The examples provided are just a few
of the many companies that strive to behave in socially responsible ways.
Concept Check (p. 46)
1. Outline the historical evolution of business social responsibility.

During the first quarter of the twentieth century, businesses were free to operate pretty much as
they chose. Government protection of workers and consumers was minimal. Soon after
Franklin D. Roosevelt became president in 1933, he instituted programs to restore the economy
and improve social conditions. The government passed laws to correct what many viewed as
the monopolistic abuses of big business and provided various social services for individuals.
These massive federal programs became the foundation for increased government involvement
in the dealings between business and society.
2. What is the doctrine of caveat emptor?
Caveat emptor is a Latin phrase meaning “let the buyer beware.” In other words, “what you see
is what you get,” and if it is not what you expected, too bad.
3. What are the six important business-related federal laws passed between 1887 and 1914?
These six laws are as follows: Interstate Commerce Act, Sherman Antitrust Act, Pure Food and
Drug Act, Meat Inspection Act, Federal Trade Commission Act, and Clayton Antitrust Act.
Concept Check (p. 48)
1. Explain the two views on the social responsibility of business.
The economic model of social responsibility holds that society will benefit most when business
is left alone to produce and market profitable products that society needs. The socioeconomic
model of social responsibility places emphasis not only on profits but also on the impact of
business decisions on society.
2. What are the arguments for increased social responsibility?
•

Because business is a part of our society, it cannot ignore social issues.

•

Business has the technical, financial, and managerial resources needed to tackle today’s
complex social issues.

•

By helping resolve social issues, business can create a more stable environment for
long-term profitability.
Socially responsible decision making by firms can prevent increased government
intervention, which would force businesses to do what they fail to do voluntarily.

•

3. What are the arguments against increased social responsibility?
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Chapter 2 Being Ethical and Socially Responsible
57

•

Business managers are responsible primarily to stockholders, so management must be
concerned with providing a return on owners’ investments.

•

Corporate time, money, and talent should be used to maximize profits, not to solve
society’s problems.

•

Social problems affect society in general, so individual businesses should not be
expected to solve these problems.

•

Social issues are the responsibility of government officials who are elected for that
purpose and who are accountable to the voters for their decisions.

Concept Check (p. 50)
1. Describe the six basic rights of consumers.
•

The right to safety. The products consumers purchase must be safe for their intended
use, include thorough and explicit directions for proper use, and have been tested by the
manufacturer to ensure product quality and reliability. Consumer safety would be an
especially important consideration in the manufacture and sale of a product such as a
hedge trimmer.

•

The right to be informed. Consumers should be given complete information about a
product, such as ingredients in food or how to take care of a specific garment. Producers
should also give information about the potential dangers of using their products, such as
a reaction to drugs.

•

The right to choose. Because of competition, consumers can choose the particular
product they want among several similar products, such as automobiles or men’s shirts.

•

The right to be heard. Citizens can complain through the Better Business Bureau or can
often call a company directly on a toll-free number.

•

The right to consumer education. People are entitled to be fully informed about their
rights as consumers. An example would be the disclosure notices provided by banks or
credit card companies.

•

The right to service. Consumers have the right to convenience, courtesy, and
responsiveness from manufacturers and sellers of consumer products, which is one of
the reasons that companies put 800 numbers on their products for customers to contact
them.

2. What are the major forces in consumerism today?
The major forces in consumerism are individual consumer advocates and organizations,
consumer education programs, and consumer laws.
3. What are some of the federal laws enacted in the last 50 years to protect your rights as a
consumer?
See Table 2-4 in the text.
Concept Check (p. 53)
1. What is an affirmative action program? What is its purpose?
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58 Chapter 2 Being Ethical and Socially Responsible

An affirmative action program is a plan to increase the number of minority employees at all
levels within an organization. The objective of such a program is to ensure that minorities are
represented within the organization in approximately the same proportion as in the surrounding
community.
2. Why did Congress create (and later strengthen) the Equal Employment Opportunity
Commission?
The Equal Employment Opportunity Commission (EEOC) was created by Congress to
investigate complaints of discrimination and to sue firms that practice discrimination in
employment.
Concept Check (p. 57)
1. Describe the major types of pollution. What are their causes and their cures?
Businesses contribute to water pollution by dumping wastes into the water; to air pollution by
admitting hazardous chemicals into the air; to land pollution by burying harmful wastes and
chemicals; and to noise pollution by allowing excessive noise caused by traffic, aircraft, and
machinery. Water pollution can be reduced by building larger and more efficient sewage
treatment plants and removing sulfur emissions, a cause of acid rain. Pollution control devices
on vehicles and smokestacks help reduce air pollution. The EPA has been working to clean up
the land. Suits against companies that dump wastes could help fund the cleanup operation.
Noise levels can be reduced by isolating the source of noise away from the population and by
modifying machinery and equipment to reduce noise levels.
2. Summarize major provisions of federal environmental laws enacted since 1970.
See Table 2-5 in the text.
3. Who should pay for a clean environment?
Many business leaders offer one answer—tax money should be used to clean up the
environment and to keep it clean. They reason that business is not the only source of pollution,
so business should not be forced to absorb the entire cost of the cleanup. Environmentalists
disagree. They believe that the cost of proper treatment and disposal of industrial wastes is an
expense of doing business. In either case, consumers probably will pay a large part of the
cost—either as taxes or in the form of higher prices for goods and services.
Concept Check (p. 59)

1. What steps must a business take to implement a program of social responsibility?
The steps are as follows:
•

Commitment of top executives. Top executives should develop a policy statement that
outlines key areas of concern.

•

Planning. Managers should form a plan that deals with each of the issues described in
the policy statement.
Appointment of a director. A top-level executive should be appointed to direct the
organization’s activities in implementing the policy.

•

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Chapter 2 Being Ethical and Socially Responsible
59

•

The social audit. The social audit is a comprehensive report of what an organization has
done, and is doing, with regard to social issues that affect it.

2. What is the social audit? Who should prepare a social audit for the firm?
A social audit is a comprehensive report of what an organization has done and is doing with

regard to social issues that affect it. This document provides the information the firm needs to
evaluate and revise its social responsibility program.
3. What are the three sources of funding for a social responsibility program?
a. Management can pass the cost on to consumers in the form of higher prices.
b. The corporation may be forced to absorb the cost of the program if, for example, the
competitive situation does not permit a price increase. In this case, the cost is treated as a
business expense, and profit is reduced.
c. The federal government may pay for all or part of the cost through tax reductions or other
incentives.

2.7b Discussion Questions
1. When a company acts in an ethically questionable manner, what types of problems are
caused for the organization and its customers?
When an organization engages in ethically questionable behavior, it hurts the integrity of the
organization and damages the company’s image held by customers and potential customers.
Customers lose trust in this type of organization and sometimes seek other sellers. An
organization sometimes has to spend considerable resources to rebuild relationships with
customers when the firm’s integrity is questioned.
2. How can an employee take an ethical stand regarding a business decision when his or her
superior already has taken a different position?
By whistle-blowing, the employee can inform the press or government officials of his or her
firm’s unethical practices. (You may want to discuss the repercussions of whistle-blowing.)
3. Overall, would it be more profitable for a business to follow the economic model or the
socioeconomic model of social responsibility?
In the short run, the economic model would be more profitable because the focus is on profits,
not on social responsibility. The socioeconomic model would be more profitable in the long
run. It is a proactive stance for companies and one that many firms are embracing. Consumers
have come to expect this of companies with which they do business. Money spent on acts of
social responsibility would be considered business expenses.
4. Why should business take on the task of training the hard-core unemployed?

This task is another aspect of social responsibility. When these people receive training, they
become more employable. As a result, they can earn a wage and then return it to business
through their spending for consumer goods. Overall, such training programs improve the
economy, which in turn helps the firms that sponsor the programs.
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60 Chapter 2 Being Ethical and Socially Responsible

5. To what extent should the blame for vehicular air pollution be shared by manufacturers,
consumers, and government?
Manufacturers should help in producing and/or using pollution control devices for cars and
trucks. Consumers should buy and use products that limit air pollution. The government should
set guidelines for the production and use of such products.
6. Why is there so much government regulation involving social responsibility issues? Should
there be less?
There is so much government regulation because unethical businesses continue to ignore their
social responsibility. There should not be less government regulation until businesses are ready
to police themselves.

2.7c Comments on Video Case
PortionPac Chemical Is People-Friendly, Planet-Friendly
Suggestions for using this video case are provided in the Pride/Hughes/Kapoor Video Guide.
1. PortionPac is family-owned. How does this private ownership affect the company’s ability
to follow the socioeconomic model of social responsibility?
Thanks to its private ownership, PortionPac is free from the pressures that public corporations
face in explaining their management decisions and financial results to stakeholders such as
shareholders and securities analysts. PortionPac’s owners are responsible for all decisions about
investing in social responsibility programs, and they choose to be involved because they care

about the welfare of their employees, their customers, their community, and their planet.
2. If you were appointed to conduct a social audit of PortionPac, what type of information
would you collect? What questions would you ask? Explain your answer.
Students’ answers will vary. Some possible questions include: What are the potential shortand long-term environmental effects of our products? What are we doing to educate employees
and customers about how to use our products safely? Are our policies and practices promoting
ethical decisions on the part of our workforce and our suppliers? What procedures are
employees expected to follow if they need to report suspected violations of our ethical
standards, and how are such reports investigated?
3. Do you agree with Marvin Klein’s assessment of business ethics as a matter of common
sense? Why or why not?
Students who agree that business ethics is a matter of common sense may argue that ethical
behavior should be the cultural norm in every business, organization, and industry.
Businesspeople want to be treated fairly so they must act ethically in business situations.
Students who disagree with Klein may say that because different businesses have different
ethical codes, businesspeople can’t rely solely on common sense to guide their decisions and
actions. These students may point out that individual factors also play a role in what
businesspeople consider to be common sense.
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Chapter 2 Being Ethical and Socially Responsible
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2.7 Building Skills for Career Success
1. Social Media Exercise
In 2010, Pepsi decided to develop a new social media–based project, called Pepsi Refresh
Project, aimed at Millennials and allowing consumers to post ideas for improving their
communities. This replaced the $20 million they spent on Super Bowl advertising. The
project received more than 57 million votes. Visit the website at resh

everything/.
1. Do you think this was an effective strategy for Pepsi? Do you think this resonated with
the Millennial generation?
Although the project was a success on the social media side, that success did not translate
into sales. Pepsi lost market share, possibly because the money designated for advertising
was put into this social media campaign.
2. Do you think this is a good example of corporate social responsibility (CSR)? Why or
why not?
The idea of distributing $20 million in $5,000 to $250,000 increments for projects that are
determined to be “worthy” is a good example of social responsibility; however, this project
turned out to be filled with technical issues and privacy problems. Pepsi’s plan is to engage
its customers by having them vote for their favorite project. Money was given to the
projects that received the most votes. It is a different model than previously used and didn’t
engage stakeholders at the level of other CSR models.
3. How does this CSR example for Pepsi compare with that of its main rival Coca-Cola?
(See />Coca-Cola’s responsibility to the environment, community, and its employees is clearly
stated on its website. Its commitment to sustainability is also stated in several places on the
website. On the other hand, Pepsi’s level of responsibility is not as clearly seen nor stated.
2. Building Team Skills
Assign several students the responsibility of finding a code of ethics from a business firm.
Before class, prepare copies for everyone in the class. In class, have each group work with a
different code of ethics in completing the exercise. Ask a member of each group to report the
results before the class.
3. Researching Different Careers
Who is to say what is right and what is wrong? Things that influence our values include
religious teachings, parental guidance, television, cultural traditions and values, peers’ values
and behaviors, major events in the world, and social acceptance of behavior over time. Each
student’s code of ethics should include (1) the student’s responsibilities to life, work, friends,
family, etc. (How will the student treat others?) and (2) the student’s expectations from life,
work, friends, family, etc. (How does the student expect to be treated by others?).

2.8 QUIZZES I AND II
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62 Chapter 2 Being Ethical and Socially Responsible

Quiz I
True-False Questions

Select the correct answer.
1.

T F Social responsibility is the recognition that business activities have an impact on society
and the consideration of that impact in business decisions.

2.

T F The economic model of social responsibility places emphasis not only on profits but also
on the impact of business decisions on society.

3.

T F Consumerism consists of all those activities that are undertaken to protect the rights of
consumers in their dealings with business.

4.

T F Six basic rights of consumers are the right to safety, the right to be informed, the right to

choose, the right to be heard, the right to consumer education, and the right to service.

5.

T F Whistle-blowing is an attempt by business to stop employees from exposing their unethical
business behavior.

Multiple-Choice Questions

Circle the letter before the most accurate answer.
6.

One factor that influences ethical decision making because of the amount of freedom given to
employees is the __________ factor. a. business
b. consumer
c. marketing
d. opportunity
e. internal

7.

A plan designed to increase the number of minority employees at all levels within an
organization is called
a. the hard-core unemployed.
b. an affirmative action program.
c. the Equal Employment Opportunity Commission.
d. the socioeconomic initiative.
e. the right to work.

8.

Initiating a social responsibility program takes
a. the commitment of top executives.
b. the commitment of middle managers.
c. the commitment of employees.
d. the commitment of competitors.
e. no commitment.
Funding for a program of social responsibility can come from
a. the employees in the corporation.
b. volunteer efforts of the American public.
c. corporations that absorb the costs as a business expense.

9.

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